House of Commons Issue No. 16

Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade

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[Traduction en français]
On the review
mechanism, it is linked to a large extent to
greater transparency in the work of the IMF. This is
an issue that is very much alive and I think will be
looked at in the context of our preparation for Halifax
and the institutional review item.

The extent to which you can reproduce the kind of
World Bank model that works on projects and specific
program lending as opposed to a macroeconomic program
is a difficult analogy to establish. However, the
issue of transparency and greater evaluation of the
effectiveness of the IMF economic policy
approach, I guess,
is very much one that is current in the IMF
and in our group.

Military expenditures--that is certainly a theme
Canada has pushed in the World Bank in particular. I'm
struck by the fact that over the last three or four
years it has been
emerging as a subject of legitimate debate
both in the World Bank and other development banks and
in the UN. In fact, the UNDP human development report
is now every year publishing data and statistics. I
think we're creating an acceptance for the notion that
this is a legitimate concern.

The real question facing us is the
extent to which you can actually establish
hard-and-fast rules, quantify
percentages, relationships. That's more difficult.

But it's very much on the table.
It's an issue we've carried in the World Bank, and it
is one we are in fact discussing in the context of
the reform.

Third, EDs', executive directors', accountability
to parliament--I would need to have a legal opinion on
that. But you have to remember EDs are officers of
the bank or the IMF, and they are paid for by these
institutions. Secondly, in our case at least,
they represent a constituency. They don't speak only
for Canada; they speak for a group of countries that
in fact elect them, both in the IMF and in the World
Bank. You have also
to remember that the accountability is
through the governor of the bank; and the governor is
the Minister of Finance,
who is accountable in that sense.

As I say, I would need legal advice. I'm
just pointing
out that there are some characteristics of EDs that
make this accountability relationship to
Parliament...it raises a question
in my own mind, at least.

Mr. Regan: Are there people
we appoint as delegates, at least,
to those institutions where there are directors?

Ms Fréchette: No.

Mr. Regan: We simply have a vote on who
gets elected as a director.

Ms Fréchette: Yes.

Mr. Lastewka (St. Catharines): We have talked about
the economic and financial crisis
around the world. The question I always
have is this. Is the G-7 group
in a frame of mind to look at the
economic crisis we have around the world, to
face it in a cooperative way?
Is there a will to look at the problems
we have around the world and face them?

Mr. Smith: You have to look at this
historically. The G-7 has been around for twenty years.
On some occasions in the past the G-7 has done
well and addressed what is the current major issue.
At other times it has probably done less well.

One of the problems that inevitably confront the G-7
is that individual countries have different problems.
We may not all have exactly the same problem.
Mr. Leblanc
called attention to our high deficit-to-GDP
and debt-to-GDP ratios. Well, Italy is there with
us. Other countries don't have that problem to the
same degree. The United States is focused on its trade
imbalances, as we know. There is inevitably pressure
on the Japanese to increase consumption
in their economy.

Inevitably what comes out, therefore, is something
of a compromise that meets the varied interests of all
the member countries.
So whether it's been a success
or not depends a little on what point of view
you're coming from, because all countries are not facing the
same issue.

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Now, with respect to the capacity to deal with the
challenges ahead, which I said is the underlying theme
for Halifax, there may be a higher degree of common
interest that would result in a consensus on those
issues, which would try to basically--and I will come
back to that--push them forward on the international
agenda. It's not within the capacity of the seven, as
I said, to take decisions that will affect institutions
that have a broader membership than the seven.

Mr. English (Kitchener): We had a round table two
days ago with Dr. Boehm, among other participants,
and two of the panellists, Professor Kirton and
Professor Helleiner, differed in their views on the
banks. Professor Kirton said that we give twice as
much to the banks as they germinate, and in the case of
Britain four times as much. We give too much.
Professor Helleiner said that's not true, we just look
at it in a different way.

I think the question will end up with Mr. Smith.

In their discussions it was quite clear that Dr.
Helleiner thought that Canada's place was as a
representative of those countries that were excluded,
not simply the poor ones but countries such as the
Netherlands and Sweden that have high percentages of
donations to the multilateral banks.

In terms of the perception of Canada's role in the
banks, within the G-7 are we perceived as representing
those who aren't there? In terms of our own role in
the banks, do we perceive ourselves as being more of a
spokesperson for those that are left out than the other
countries of the G-7?

Mr. Smith: I would be very hesitant about Canada
taking on the role in the G-7 to speak for anybody
other than Canada. I think that if you look back at
the origins of our participation in the G-7--and we
were not at the first meeting--it was because the
summit was rather European dominated, because our
Americans friends were anxious to have another North
American perspective on the international issues, and
because we were a credible member of the club in our
own right.

Now, that said, there has been a history. I think
back to when Prime Minister Trudeau presided over one
of the G-7 meetings, where he went out and talked to
people in the less developed part of the world to try
to be able to bring forward their point of view.
It's one of the reasons why it strikes me, as I said
earlier, that a focus on the capacity of the
institutions to deal with the problems of the poorest
would be an appropriate one for Canada. There's a
certain history of that.

I think President
Mitterrand did the same thing.

I think therefore what you saw was our seeing
there's a problem in the world and feeling the summit
should be addressing that problem--the north-south
problems, as they were described then. However, I don't
think we ever arrogated to ourselves the responsibility
to speak on behalf of those countries. Similarly with
the ASEAN countries we will consult with, I think
our position would be better informed if we understand
what their concerns are, but I think it would be
inappropriate for us to take on a responsibility to
actually be speaking on their behalf.

Ms Fréchette: Mr. Chairman, I would just like to
underline one fact. In the bank and in the IMF we
actually speak on behalf of a number of developing
countries because we are heading this constituency.

Secondly, to complete Gordon's thought, I think
part of the value-added we bring to the G-7 table
is the fact that by virtue of who we are, we happen to
have particularly good relations with several groupings
around the world.
We are unique in that situation.
We do not necessarily speak for them, but we certainly
bring an understanding of the atmosphere of the
Francophonie, of the Commonwealth, that no other G-7
country can match. In that sense we bring a knowledge
and an intimacy that others don't.

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Mr. English: In a sense, then, what you are
saying, if I can interpret the comment, is that we're
reluctant to admit we are seen in that way, but
sometimes we act in that fashion. That was the
argument Professor Kirton made, if I remember
correctly. Dr. Boehm was there. He gave examples
from 1983 and 1987, specific Canadian initiatives on
behalf of not Third World simply but, in the case of
1983, Cold War issues, saying Canada would be somehow
more representative of the countries that are not the
great powers, the countries that are not the major
powers, whether they be the United States
or Japan or Germany.

Mr. Smith: All I would say is that I
think we act on the basis of our perception of what our
own interests are.
As Louise Fréchette has said--and I think this is also
a partial answer to Mr. Leblanc--we are, for a
variety of reasons, members of a lot of different
groups. We are not a superpower with superpower
interests, be they of a political, military, or
economic nature.

But where we are...and this is what I
think brings--and maybe there isn't the contradiction
that appears here--the issue together.
For us, where we sit in North America, the system is
particularly important. It's important in trade terms.
It is important in international political terms.
It is one of the reasons why we've always been a
supporter of a strong GATT and the creation of the
WTO. It is one of the reasons why the United Nations
has played a central part in our diplomacy. We believe
a rules-based system, with strong international
institutions, is very much in our own interest.
It happens also to be in the interests of a number of
other countries that are in more or less similar
situations. But I still think when we advance
positions, we do so on that basis of our own concept of
national interest. But it's done in that context
I've just described.

The Chairman: Mr. Smith is going to
leave shortly. Before he leaves, on behalf of the
committee, I want to probe him a little on
something he has said. This is a
double-barrelled question.

You said the reform of the Bretton Woods
agreements and that process would be welcome. From
that I have two questions.

The first is this. We have the impression
from within our
own government that reform process is more welcome
from your side of the table than from the Finance side of
the table, and Finance is more conservative
about reform of those institutions than other
members of the government. I would ask if you both
would comment on that.

That is only the first part of the question.
The second part is more difficult, in
a sense. When we speak
of reform of the Bretton Woods
institutions, are we genuinely saying we will give
them authority over our lives as well as the lives of
others? Are we, as Canadians, willing to urge reform
of those institutions?

It's all very well for us to say the World Bank
should have conditionality on armaments so we
won't give money to countries that don't have certain
arms practices, or military practices, but is Canada
going to urge that the IMF should have authority, for
example, to come up with intelligent financial
management practices that would bite into us, the
United States, Japan, the European Union, and the other
big players? In fact, it's my understanding
there is a IMF desk watch on Canada today. Are we
encouraging that? Do we like it? How will we live
with it? How far are we willing to go down this road?
How far are our allies going to go down this road? Or is
this just a lot of talk?